Gold's post-Fed slide continues
Source: American Gold Exchange
-- Gold lost 3% and silver 4.2% today as yesterday's Fed-driven slide continued. Prices for Treasury bonds were also hit hard as yields rose to their highest level in four months and the dollar strengthened, reaching an 11-month high against the yen. It was gold's lowest close in eight weeks. Platinum and palladium both fell 1.6%.
At the close: April gold lost $51.30 to $1,642.90; May silver dropped $1.40 to $32.18; April platinum slid $26.50 to $1,675.30; and June palladium fell $11.15 to $697.70 an ounce
The main driver behind gold's slide is continuing fallout from yesterday's FOMC statement signaling a slightly improved outlook for growth and offering no hints of pursuing another round of quantitative easing in the near future. The Fed actually said nothing either way about additional easing, but the silence was seen as reducing the likelihood of QE3. Speculative players like hedge funds, which had built up long wagers in anticipation of more easing, headed for the exits. Still, the Fed said positively that its current asset-purchasing programs will continue unabated, as will its policy of near-zero interest rates until late 2014, both of which are supportive of higher gold prices because they increase inflation risk.
Ironically, as Bloomberg reported today, many economists think Bernanke's statement actually keeps the door open for additional easing. The way the statement was crafted was to keep their options open, said Stephen Stanley, chief economist at Pierpont Securities LLC. Mohamed El-Erian, chairman of investment giant Pimco, still sees more easing on the way: Our own view is that QE3 will probably materialize down the road simply because the endogenous engines of growth, while they are picking up, are not strong enough yet given all the headwinds faced that face the U.S. economy." And at the annual Bloomberg Link Precious Metals Conference in New York yesterday, the consensus among the economists and fund managers surveyed was that "gold is poised for a 21% gain in 2012" because of record amounts of hoarding by individuals and the expansion of reserves by central banks for the first time in a generation. QE3 wasn't mentioned as a key to higher prices.